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The true cost of downsizing

Pay Day
Realtors' signs are hung outside a newly sold property in a Vancouver neighbourhood where houses regularly sell for C$3-C$4 million ($2.7-3.6 million) September 9, 2014. Chinese investors' global hunt for prime real estate is helping drive Vancouver home prices to record highs and the city, long among top destinations for wealthy mainland buyers, is feeling the bonanza's unwelcome side-effects. The latest wave of Chinese money is flowing into luxury hot spots. But it has also started driving up housing costs elsewhere in a city which already ranks as North America's least affordable urban market. REUTERS/Julie Gordon (CANADA - Tags: REAL ESTATE BUSINESS)

As more and more Baby Boomers reach their retirement years, Canadians are starting to take a serious look at the merits of downsizing. What they may not fully appreciate is the cost involved.

For a $400,000 home in Ontario, for instance, you could be looking at $40,000 just to make a move, according to Milton mortgage agent John Cavan of Mortgage Architects.

“Nine out of 10 people who downsize are going to forget at least 20 per cent of the costs involved,” Cavan says. “It’s expensive.”  

Here’s a look at some of those costs, so you’re not side swiped.

Land transfer tax

Also referred to the property transfer tax in British Columbia, this one is paid to the province when the transaction closes. Rates vary across the country, with Ontario’s rules being as complicated as a Calder mobile.

All provinces have a land transfer tax, except Alberta and Saskatchewan, which instead levy a smaller transfer fee.

On a $400,000 home, the taxes or fees would range from $80 in Alberta to $1,600 in Newfoundland to $5,650 in Manitoba to $6,000 in B.C. and Nova Scotia, according to Nanaimo, B.C., ReMax realtor John Cooper.

Realtor’s commission

Again, the calculations for this fee vary, with real-estate agents in Ontario typically charging 5 per cent while those in B.C. typically charge 7 per cent on the first $100,000 and 3 per cent on the rest. And then there’s provincial tax on those commissions.

So on a $400,000 home in B.C., the commission is about $14,500 plus tax.

No wonder discount realtors and private sales are becoming more popular.

Legal costs

You need a lawyer to seal the deal. Generally, fees range from $850 to $1,000, Cavan says. And of course there’s tax on that too.  

Mortgage penalty

“It’s very hard to time things to the exact maturity of a mortgage, so you could be looking at penalties to break a mortgage,” Cavan says.

The fee structure varies greatly from one lender to another and depends on specific mortgage terms, but most closed fixed-rate mortgages have a prepayment penalty of either three months’ interest or the interest rate differential, whichever is greater.

Most financial institutions have penalty calculators online.


People who are downsizing are typically at an age where they can’t do the move themselves and their kids are busy, so it makes more sense to hire movers,” Cavan says. They might even need to hire movers to pack boxes too.

Moving costs are not inexpensive; they could be $5,000 to $10,000, depending on the size of the home, the amount of stuff you have, and where you’re moving,” Cavan says.


If you encounter a period of waiting between selling your home and moving into a new one, you’ll have to consider the costs of putting things in storage.  

Repairs and maintenance

If you need to do minor repairs like painting or major ones like putting on a new roof, improvements that will help sell your home, you’ll have to take into account those costs too, which can add up.

Reconnection fees

Phone, cable, Internet, gas, and electricity companies will all charge you to close and renew your accounts, plus you’ll pay Canada Post to reroute your mail.

Of course there are all sorts of reasons people decide to downsize: maybe they need to use proceeds from the house sale to fund their retirement or they can simply no longer handle a 2,000-square-foot home with stairs and a lawn.

“There’s a lot of emotional cost in this too,” Cavan says. “Maybe it’s a home they’ve lived in for 20 years or longer, their neighbours are best friends, and they’re leaving familiar surroundings.

“Then there are factors like changing your address on your driver’s license and redirecting your mail. There are nuisance factors.”